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Recently, treasury grants become available for solar installations. Rather than taking a 30% tax credit you can now receive a cash grant equivalent to 30% of the total installed costs of your photovoltaic system. In February 2009, a Federal stimulus package was passed making this grant possible, and making solar a viable option for many businesses.
Solar thermal electric systems, solar thermal process heat systems, and photovoltaic systems are all eligible for an extended Federal government corporate tax credit of 30%. While this is a fixed percentage, the monetary value is not fixed. In other words, if your company's solar system costs $10,000 for $1 million, you will still receive a 30% tax credit on the installation costs of your solar energy system. This tax credit was extended on 2008 through 2016.
Many companies plan on using the Federal tax credit in combination with other financial incentive programs. Keep in mind that incentives are represented by the income with which a company pays their Federal taxes. So if your company received a grant for your solar energy project, this money is not factored into deciding the amount of your 30% tax credit. Other rebates, grants and incentives fall under this category, but several incentives are exempt, such as non-taxable utility rebates and non-taxable grants. Generally speaking, whatever amount of income you pay Federal taxes on is the amount that will be factored into determining your 30% tax credit from the Federal government.
The Modified Accelerated Cost-Recovery System (MACRS) allows for a 5-year accelerated depreciation. The MACRS program, and the 30% tax credit are designed to make it simpler to invest in a renewable energy system. When calculating the depreciation value on a commercial solar energy system, you must consider the “tax depreciation basis.” Simply put, companies cannot count the entire 30% tax credit when figuring the depreciated value of a solar energy system.
Similarly, gross income is often reduced by depreciation, so the greater depreciation allowed, the lower a company's net income. The lower net income or profit, the lower taxable figures for shareholders. To this end, using your company's full value will benefit your earning potential. You can lower your tax liability during the short-term when investing in solar energy. Investing in solar energy will drive your long-term savings. This purpose of this is to provide incentives for companies to invest in solar energy.
The Energy Tax Act was first passed in 1978, at a rate of 15%. It wasn't until the Energy Policy Act of 2005 that this rate was increased to 30%, but there was a value cap added at $2,000. This cap was later lifted, and the tax credit was extended in 2007. As you can see, solar energy legislation is constantly changing, so it's important to consult with a professional solar installation company to be sure your tax and incentive information is up to date.